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The language learning company is coming off a multiyear struggle after management missed trends and pursued faulty paths. Are things finally ironed out?

Software-based language learning platform Rosetta Stone(NYSE:RST) has seen the full gamut of the market's typical emotions -- IPO hysteria, tech industry fever, and failed expectations. Today, the company trades near its lowest point in more than a year and down 60% over a five-year period. If one were to take just a cursory glance at the company's fundamentals, it doesn't look that appetizing, with poor sales figures and a forward earnings ratio of roughly 140 times, according to Yahoo! Finance. The thing is, though, the company is in turnaround with new products coming to market and a quickening shift to mobile (one of the big reasons the company fell flat to begin with). Is now the time to get behind Rosetta Stone?

Now you're speaking my languageSales were down 1% in Rosetta Stone's recently ended quarter as the company's missteps in years past continue to drag on its performance. The company's iconic yellow stands found in malls and airports around the world were tantalizing to investors at first but have since become a struggle and last year were broadly shut down. Direct-to-consumer, the largest segment, was able to grow 7% in the quarter, though retail sales continued their precipitous decline -- down 23% year over year.

The most interesting element to Rosetta Stone's recovering business is the enterprise segment. Bookings for the segment grew nearly 50% as the company tacks on more and more corporate clients. The enterprise segment is absolutely crucial to Rosetta Stone's business as business culture learning is a trend with tremendous tailwinds. The globalization of not just multinational corporations but businesses of all sizes require a greater knowledge and understanding of foreign languages and cultures than ever before. What's even better is that the company does not have to solely rely on selling its consumer level packages -- expensive and arduous considering the increasing availability of mobile-based, sometimes costless language learning platforms.

Rosetta Stone also recently acquired educational technology platform Lexia for $22.5 million in cash -- giving the company an immediate benefit in terms of both sales and market share. Lexia's technology is used in thousands of schools and more than one million students.

Ready to head back up?Rosetta Stone management has made the right moves in expanding further into educational tech and the enterprise world. As the failed kiosk experiment goes further into the rearview mirror and the company's financials have a chance to recover, the strength of these recent decisions should be able to shine. One thing that Rosetta Stone has had throughout the good and bad times is cash flow.

Management guided full-year 2014 adjusted EBITDA in the range of $18 million-$22 million. The company expects to spend between $10 million and $14 million on continued acquisitions and integrations. The company's market cap is under $250 million, and with zero debt and $100 million in cash on the books, the roughly 8.3 times EV/EBITDA on the low end of forward guidance is strikingly appealing if the turnaround strategy proves successful. That is one big if. However, at this point, management deserves credit for its strategic maneuvers. Take a close look at this story in the coming months. Rosetta Stone may be entering the fourth phase of market madness: recovery.

Author

Michael is a value-oriented investment analyst with a specific interest in retail and media businesses. Before coming to the Fool, Michael worked with private investment funds focusing on deep value and special situations. Currently living in the media capital of the world--Los Angeles, California.